The following selected transactions were taken from the books of Ripley Company for Year 1 : 1. On February 1, Year 1 , borrowed $54,000 cash from the local bank. The note had a 6 percent interest rate and was due on June 1 . Year 1. 2. Cash sales for the year amounted to $235,000 plus sales tax at the rate of 6 percent 3. Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 4 percent of sales. 4. Paid the sales tax to the state sales tax agency on $205,000 of the sales. 5. Paid the note due on June 1 and the related interest. 6. On November 1, Year 1, borrowed $43,000 cash from the local bank. The note had a 6 percent interest rate and a one-year term to maturity. 7. Paid $3,300 in warranty repalirs. 8. A customer has filed a lawsuit against Ripley for $13 million for breach of contract. The company attorney does not believe the suit has merit. Required a. Answer the following questions: (1) What amount of cash did Ripley pay for interest during Year 1 ? (2) What amount of interest expense is reported on Ripley's income statement for Year 1 ? (3) What is the amount of warranty expense for Year 1 ? b-1. Post the liabilities transactions to T-accounts at December 31 , Year 1 . b-2. Prepare the current liabilities section of the balance sheet at December 31 , Year 1 , c. Show the effect of these transactions on the financial statements using a horizontal statements model. Use + for increase, for decrease, and leave blank for not affected. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA). financing activity (FA), or not affected (leave blank). The first transaction has been recorded as an example. Post the liabilities transactions to T-accounts at December 31 , Year 1 , (Do not round intermediate caiculations. Round your answi dollar amount.) Tepare the current liabilities section of the balance sheet at December 31 , Round your answers to the nearest dollar amount.) affected. In the statement of Cash blow the financial statements using a horizontal statements model. Use + for increase, - for decrease, and leava bianik? affected (leave blank). The first transaction has been recorded as an example. (Not and cells requite input), ifvesting activity (IA), finaneing activity (FA), of ne affected (leave blank). The first transaction has been recorded as an example. (Not all cells require input.)
